In December 2018, Baidu, Inc. (NASDAQ:BIDU) released its earnings update. Generally, analyst consensus outlook appear pessimistic, with profits predicted to drop by -42% next year compared with the past 5-year average growth rate of 14%. With trailing-twelve-month net income at current levels of CN¥27b, the consensus growth rate suggests that earnings will decline to CN¥16b by 2020. Below is a brief commentary on the longer term outlook the market has for Baidu. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How is Baidu going to perform in the near future?
The longer term expectations from the 31 analysts of BIDU is tilted towards the negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of BIDU’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
By 2022, BIDU’s earnings should reach CN¥27b, from current levels of CN¥27b, resulting in an annual growth rate of -1.4%. This leads to an EPS of CN¥76.52 in the final year of projections relative to the current EPS of CN¥78.64. The main reason for BIDU’s earnings contraction is cost growth exceeding top-line growth of 14% in the next three years. Furthermore, the current 26% margin is expected to contract to 17% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Baidu, I’ve compiled three key factors you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Baidu worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Baidu is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Baidu? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.